Delivery companies are dismayed over 15pc Value Added Tax (VAT) to be levied upon them after officials of the Ministry of Finance discuss imposing a tax on transport services that had not previously been considered taxable. Representatives of the delivery companies were alarmed by the new bill as the delivery industry is too young and fragile. They said the business could be discouraged urging the government to support the businesses with incentives. Abraham Rega, the discussion moderator and senior legal expert, has given delivery companies a fortnight to provide evidence supporting their argument. According to the proclamation draft up for discussion last week, shipping services issued by Ethio-post and ride-hailing services are also bound to pay tax if the bill sees the light of day. Value-added tax (VAT), a consumption tax levied on imported goods, domestic services, and sales, is one of the government’s primary revenue sources. The federal government generated close to 61 billion Br, last year from domestic services last year, eyeing a 17pc growth from the previous year. The bill's authors contemplate broadening the tax base, incorporating different businesses at a time of shrinking tax revenues due to the pandemic, runaway inflation, civil war, and political instability. According to a World Bank report, most countries are still struggling to collect sufficient revenues to finance their own development. It suggests countries must increase their revenue collection in order to meet the basic needs of citizens and businesses and puts this level of taxation as a tipping point to make a state viable and put it on a path to growth.
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